Accord reached on 421-a program, rent law renewal

Governor Andrew Cuomo and leaders of the State Legislature agreed Thursday to significantly overhaul the 421-a tax abatement program—following closely the proposals of Mayor Bill de Blasio—and to strengthen the state’s rent regulations.

The final deal, part of an end-of-session package known as a “big ugly,” would give four more years to each program. It was met with reactions that ranged from glee to satisfaction to outright anger. Tenant advocates called the changes to the rent laws a complete failure. Landlords also said they were displeased.

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The agreement on 421-a, a key subsidy that is meant to spur development but has been criticized as a giveaway to millionaires, seemed to satisfy both real estate interests and constructions unions, the later of which had been calling for a prevailing wage mandate in the law.

The bill does not include such a provision, but instead hinges the future of the program on one big caveat: That unions and developers reach an agreement on wages. If they’re unable to do so in the next six months, the program will end.

In announcing the deal at an Albany press conference with Assembly Speaker Carl Heastie and Senate Majority Leader John Flanagan, the governor once again criticized de Blasio’s original plan for 421-a and said the end result was far better.

“I did not support the mayor’s 421-a proposal,” Cuomo said. “I don’t believe it could have passed.”

But the changes lawmakers did agree to make to 421-a are, in fact, built around the proposal the mayor unveiled in early May. It would extend the length of the abatements from 25 years to 35 years, mandate that all rental projects receiving the subsidy include affordable housing in their project and, like de Blasio’s proposal, gives developers three options for affordability.

In statement Thursday evening as legislators prepared to vote, the mayor gave his blessing to a bill he seemed to know little about until it was released.

“We’ve secured a strong new program with most of the reforms we sought: requiring affordable housing in every corner of the city, doubling the number of affordable apartments produced, and slashing the subsidy per apartment dramatically,” de Blasio said. “It also looks like we’ve successfully ended benefits for luxury condos, with only mid-market units in the outer boroughs now eligible. Taken as a whole, this is a game-changer. From the get-go, we focused on making good policy, and we’ve achieved just that.”

Aides to the mayor said the changes to 421-a could result in the creation of 24,000 affordable housing units over a decade—just 1,500 fewer than under their plan. The existing program, they said, would result in about 12,000 new units. It would also reach lower incomes than the existing program, with affordability requirements down to $31,000 per year.

But the proposal does leave out a mansion tax the mayor had sought. It would have generated, according to City Hall and the Independent Budget Office, about $2 billion in revenue over a decade. That would have offset the estimated $2.8 billion price tag, over the same period, of the changes to 421-a.

The measure, as de Blasio said, would not eliminate condominium and cooperative projects from the program. Instead, it would limit condo and co-op abatements to buildings in the outer boroughs that have fewer than 35 units. Buyers would be required to live in the condos for at least five years, and market values would be limited to about $725,000—an assessed value of $65,000.

While saving such condo projects is of little significance to the big-time developers that make up the Real Estate Board of New York, which supported de Blasio’s proposal, it is a win for some small condo developers who may have faced extinction without the abatement program. The inclusion of condos had been fought for by members of the Senate Republican conference.

All those changes to the program, including the requirements that between 25 percent and 30 percent of new rental projects include “affordable” apartments, would not apply to projects that start construction before January. The measure also grandfathers any projects that complete 421-a applications before the end of the year under the exiting program.

But whether anyone will end up getting those abatements depends entirely on whether the largest trade group for developers, REBNY, can cut a wage deal with the largest organization representing construction union, the Building and Construction Trades Council of Greater New York. In an apparent sign of their willingness to come to an agreement, the heads of both groups—Steven Spinola of REBNY and Gary LaBarbera of the trades council—issued a joint statement.

“Extending and reforming the 421-a affordable housing program was one of our top priorities for this legislative session,” they said, then thanked lawmakers. “We look forward to working together to craft a long-term, comprehensive plan to ensure that a reformed 421-a program can maximize the creation of affordable housing in New York City for years to come. We look forward to partnering over the next months to structure a program that works for the real estate community, and works for the hard working men and women who build affordable housing in New York City.”

The real estate board fought hard against a proposal to require a prevailing wage for construction work, something it said would threaten the viability of many projects. The mayor, too, had said it was a bad idea and his administration estimated it would be mean 17,000 fewer units would be built over a decade.

Some unions, however, banded together under an umbrella known as Up4NYC and launched a “seven-figure” ad campaign to press the issue. They said Thursday the requirement to negotiate was satisfying enough.

Paul Fernandes, executive director of the New York City and Vicinity Carpenters Labor Management Corporation, said lawmakers “heard our call and have adopted a program that will lead to a fair deal for working families.”

The changes to the rent laws seem to be much more contentious, and Assembly Democrats had tried until the last minutes Thursday to get stronger reforms. The amendments fall considerably short of what de Blasio—and even Cuomo—had been publicly calling for. Tenant advocates, who had sought an end to vacancy decontrol and other major changes, declared the governor a failure.

“The claim that it’s the best law in the history of the state is laughable and a flat out lie,” Katie Goldstein, who leads the Alliance for Tenant Power, said in a statement. “This will have devastating effects not only on the working class, but the middle class and ethnic communities that depend on rent protections to be able to afford their homes.”

Cuomo, for his part, said the revisions represented the “best rent reform package in history” and scoffed at critics, saying, “For some people, it will never be enough, frankly.”

“There are more protection in this law than ever in history,” he said. “But it’s still not enough, say the advocates. Yes. We advocated for the ideal. We live in the real. It would be better to [have] lost no units. Of course. Of course. It would be better if no one got sick. It would be better if no one had to pay taxes. You know a lot of things would be better.”

The changes to the rent laws differ little from what was discussed earlier in the week, when lawmakers announced a “framework” for the legislation.

The bill would increase the vacancy decontrol threshold—the point at which empty apartments can go to market-rate rent—from $2,500 to $2,700. That limit will be “indexed” to rise based on amounts set annually by rent guidelines boards in New York City and suburban towns that have rent protections.

The measure would spread out the cost of major building improvements over a longer period of time, reducing the amount landlords can increase rents. In buildings with more than 35 units, that period would increase to 108 months from 84 months. In buildings with fewer than 35 units, it would rise to 96 months.

In addition, the bill limits vacancy bonuses—the amount landlords can increase rents between tenants—on apartments that have something known as “preferential rents.” Such rents are charged by landlords who could legally collect more, but the market won’t support it. And, finally, the legislation would increase civil penalties for landlords who harass tenants.

Representatives for building owners in the city said they were not happy with the bill, and fear they’ll take a double hit when the Rent Guidelines Board votes next week on annual rent increases.

“Look, this is a further reduction in a building owner's ability to maintain their building and, if you couple that with what we expect Monday night, which is zero rent increase, I don't know how the mayor intends to achieve his affordable housing program,” Frank Ricci of the Rent Stabilization Association said.

He said spreading out capital improvements over a longer period is “going to dampen an owner's willingness to invest in his building.”